Management Consultant

A business strategist and economist with more than 25 years experience in management consulting, business and government. Specialties include Retail Lifecycle Management, supply chain strategy and operations, and business transformation.

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Acknowledgement

Wednesday, February 6, 2008

Declining value of the US dollar as calculated by the US Federal Reserve Bank in their Index of Major Currencies, 5-Feb-08, 15-year trend

I recently asked a panel of experts in the food and beverage industries to rank a set of five topics by level of importance in their 2008 strategic plans. Among 6 respondents these were their rankings in order of importance:

Results indicate continuing emphasis on the competitive necessity of reducing input costs by buying abroad (items 1 and 3), but also strong emphasis on innovation.

This analyst sees opportunity in international trade channel development (4) for U.S.-based multi-nationals in light of weakness in the U.S. dollar and the trade imbalances that are sustaining that weakness. U.S. businesses have gained price competitiveness, as the value of the US dollar has fallen more than 10% in the past year against major currencies and 33% since 9/11/01 (see chart above).

U.S. sales channels overseas have not developed nearly as fully as have our supply channels, despite the fact that U.S. made products are generally valued for their quality and safety. In part this results from draconian government policies in China, now our largest trading partner, which prevent Chinese consumers from fully participating in the value they create. This imbalance has become so extreme and prolonged that some analysts are predicting that it will cause substantial unrest within the next couple of years.Nonetheless, in China, India, Brazil and other rapidly developing countries the fast-growing middle classes represent important potential markets for U.S. goods. Manufacturers are advised to invest in opening trade channels to these consumers and take advantage of excess ocean container capacity flowing into these markets.

See "Midwest Manufacturers Fight to Stay Competitive in Global Marketplace", On Line NewsHour, 29-Nov-07